Finance and public enterprises minister Iipumbu Shiimi has tabled a bill that will make it difficult for corporations to evade paying tax.
Shiimi told the parliament on Tuesday some companies avoid paying taxes by carrying forward losses indefinitely and by deducting excessive interest on loans from taxable income.
Interest deductions are tax deductible, allowing a company to subtract its interest expenses on loans, therefore reducing its tax liability.
Shiimi said the amendments to the Income Tax Act of 1981 are in line with the Southern African Development Community protocol on finance and investment.
"Namibia is part of the inclusive framework, a body of over 145 countries working to combat base erosion and profit shifting," said Shiimi.
Speaking on whether the bill may serve to deter investment, Chamber of Mines chief executive Veston Malango said the bill is a welcomed move.
He noted that consultations were done with the chamber prior to the bill being tabled.
"Extensive consultations were made with our members and the ministry also gave us enough time to give our input on the bills," said Malango.
Currently, when a mining company starts exploration in Namibia, it is allowed to offset any expenses incurred during the duration after it starts production. This has led to companies that have been in production for many years not paying taxes to the government.
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At the same time, companies have been shifting profits by reinvesting into operations or deducting interest on loans from profits.
The new bill introduces a limit of 30% on interest deductions and stipulates that losses carried forward should be limited to five years, and 10 years for businesses in the mining sector.
This means that business will only be allowed to deduct 30% of interest on loans from taxable income.
Additionally, companies will only be allowed to deduct losses for a duration of five to 10 years, not indefinitely.
"These amendments will stimulate domestic relief to household incomes, create a conducive environment for businesses to thrive, expand investments and provide for certain incidental matters," said Shiimi.
"In order to to ensure that small and medium enterprises are able to raise capital offshore, the bill proposes an exception to the deduction limitation rule for interest expenses of N$3 million," said Shiimi.
Independent tax consultant Johan Nel says the new carry over limitation of N$1 million may pose a great loss to mining companies.
"This is going to have a big impact on mining companies, because the current proposal that I have seen is that companies will only be allowed to carry forward N$1 million," says Nel.
Economist Josef Sheehama says Shiimi's move is sensible.
The ministry decided to cut tax rates for non-mining companies from 32% to 31% in 2025, and 30% to 28% for the 2026 to 2027 fiscal year.
"The government uses the tax system as one of its main tools to promote employment, economic growth and policy objectives," says Sheehama.
The new amendment will create a more stable balance between the public and private sectors, he adds.
